Golf Galaxy Q1 Sales Jump 40.9%

Golf Galaxy, Inc. saw net sales for the first quarter of fiscal 2007 increase 40.9% to $82.5 million from $58.6 million for the same period of the prior year. Comparable store sales increased 1.0% for the fiscal first quarter on top of an increase of 10.5% for the first quarter last year.

The company reported net income for the first quarter of $2.6 million, or 22 cents per diluted share, compared to net income of $1.7 million, or 21 cents per diluted share, for the first quarter of fiscal 2006. Giving effect to the conversion of preferred shares and the company’s initial public offering as of the beginning of fiscal 2006, the company’s pro-forma diluted earnings per share for the first quarter of fiscal 2006 would have been 15 cents. A reconciliation of pro-forma net income and earnings per share is provided in a table that follows.

“Golf Galaxy achieved a 52 percent increase in net income quarter over quarter despite sales that were somewhat below our initial expectations,” said Randy Zanatta, Golf Galaxy’s president and chief executive officer. “We grew total sales by $24 million and posted our thirteenth consecutive quarter of comparable store sales increases, against a strong 10.5 percent comp in the first quarter last year. Additionally, we produced a solid year-over-year increase in our gross margin rate, largely due to the results from our strategic initiative to grow the services business — our most profitable category.”

Golf Galaxy opened eleven new stores during its fiscal first quarter, including its first stores in the Las Vegas, Pittsburgh, Syracuse, Oklahoma City and the New York City metro markets. The company currently operates 61 stores in 24 states. Golf Galaxy said it plans to open three to five additional stores during the current fiscal year, which ends March 3, 2007, for a total of 14 to 16 new stores in fiscal 2007.

    Company Outlook
    The company said that for the second quarter ending August 26, 2006:

    * Net sales are currently expected to be $98 million to $102 million, an
      increase of 40 percent to 46 percent over the second quarter of fiscal
      2006;

    * Comparable store sales are currently expected to increase 3 percent to
      5 percent; and

    * The company currently expects net income of $6.8 million to $7.2
      million, or 59 cents to 62 cents per diluted share (pending the final
      purchase price allocation of The GolfWorks acquisition and assuming 11.6
      million weighted average shares outstanding).

Based on current sales trends, Golf Galaxy today updated the guidance it provided May 22, 2006 for the fiscal year ending March 3, 2007, a 53-week period:


    * Net sales are currently expected to be $292 million to $300 million,
      compared with its prior estimate of $300 million to $310 million;

    * Comparable store sales are currently expected to increase 3 percent to
      5 percent, compared with the prior estimate of 5 percent to 7 percent;
      and

    * The company currently expects net income for fiscal 2007 of $6.8 million
      to $7.3 million, or 59 cents to 63 cents per diluted share (pending the
      final purchase price allocation of The GolfWorks acquisition and
      assuming 11.6 million weighted average shares outstanding), compared
      with its prior estimate of $7.5 million to $8.1 million, or 65 cents to
      70 cents per diluted share.

Golf Galaxy’s guidance on net income for fiscal 2007 includes estimated expenses of approximately $900,000, or 8 cents per diluted share, from the expensing of stock options.

GOLF GALAXY, INC.
    CONDENSED STATEMENTS OF OPERATIONS
    (In Thousands, Except Share and Per Share Amounts)

                                                     Three Months Ended
                                                         (Unaudited)
                                                    May 27,        May 28,
                                                      2006          2005

    Net sales                                       $82,517       $58,570
    Cost of sales                                    56,219        40,342
    Gross profit                                     26,298        18,228
    Operating expenses:
      Store operating                                15,817        10,932
      General and administrative                      4,482         3,102
      Preopening                                      1,648         1,310
    Income from operations                            4,351         2,884
    Interest income, net                                  8            15
    Income before income taxes                        4,359         2,899
    Income tax expense                               (1,787)       (1,206)
    Net income                                        2,572         1,693
    Less preferred stock dividends                        -          (998)
    Net income applicable to common shareholders     $2,572          $695
    Net income per share:
      Basic                                           $0.24         $0.37
      Diluted                                         $0.22         $0.21
    Weighted average number of shares
     outstanding:
      Basic                                      10,890,837     1,883,969
      Diluted                                    11,590,229     8,042,819